Reducing Taxes: Which State did you move to?

[Camping]

If the main reason for your move (or planned move) to a different state was (is) for reducing your tax liabilities, which state did (will) you choose? Besides reducing tax liabilities, list your other reasons which may include family, climate, etc.?

 

[MichaelB]

Hello camping. Why not tell us a little about yourself here Hi, I am... - Early Retirement & Financial Independence Community

 

[VanWinkle]

My choice is Tennessee due to lower property taxes, no income taxes, and moderate climate compared to Illinois. Once I convince DW of all of the above, a move will follow.

 

[BuysToys]

We chose to move from NY to TX. No income tax, our property taxes are less than 1/4 what they were, and sales tax isn't much more than we paid in Westchester County. All of my family is within 20 minutes of where we moved to.

 

[jetpack]

Considering FL, the no state income tax is only a bonus though.

 

[ShokWaveRider]

Considering FL, the no state income tax is only a bonus though.

Not really a good reason to pick up an move for only one perceived benefit though.

 

[Stormy Kromer]

I may be the only one here that will choose the State of South Dakota. No state income tax, excellent medical facilities and airport in Sioux Falls. World class hunting & fishing. Low cost of living and low crime. If winter gets long, fly someplace warm for a while.

 

[RunningBum]

Not really for tax reasons, but I bought property and planned a move to a state with 2% lower income tax than what I was in. I screwed myself over by waiting to exercise most of my stock options after the change in residence, and during that time the stock tanked and all my options went underwater. Took 10 more years to recover enough to finally retire.

 

[Another Reader]

If the state legislature passes the proposed estate tax, I will be out of California ASAP. As proposed by some fellow from San Francisco, the estate tax will be designed to suck up all of the difference between the current federal estate tax and the former federal estate tax, i.e. 40 percent of everything from $3.5MM to $11.4MM. I suspect that won't fly, but the potential revenue will be too much for the greedy legislators to ignore and some form of estate tax will pass.

I own rentals in Arizona and amenities there such as health care are superior to Nevada, with its' zero income tax. I would probably look at Colorado as well. I will keep the California properties, which total less than $3.5MM, as rentals.

 

[pb4uski]

We're tentatively planning to redomesticate to Florida in 2020.... I say planning because the savings are not that significant as state income tax and property tax savings are partially offset by higher car insurance.... wondering whether it is worth the effort for only ~$2,400 a year.... though OTOH I've done more to save less.

ETA: Ours wouldn't really be a move as we currently spend about half year in Vermont and Florida.... it would just be moving voting, driver's license, car registrations, etc and being careful about not spending 180 days in Vermont.

 

[38Chevy454]

While there are definitely some lower COL areas that you can move for tax savings, I would not move *only* for tax reasons. Move to where you want to live. Prioritize all of the factors in your retirement location search, taxes may or may not be a top factor. Other factors such as weather, distance to family, outdoor activities, medical access, crime rates, educational opportunities, arts, airport access, prop tax, insurance, or more should also be considered.


Edit: OP Camping, you did not list where you currently live, is it really that bad of taxes, when you look at overall picture of expenses?

 

[Fireup2020]

We are staying in NJ - mil pension not taxed, they just added a $3k income tax exemption for veterans, sales tax is lower than many other states of interest, 4 actual weather seasons, lots to do location-wise (outdoors/dining/cultural things), military bases, VA clinics/hospitals, major airport...I could go on...

 

[Midpack]

We're moving from a low COL state (109.4 vs 100 US avg) to a moderate COL state (122.5). Costs are important, but not everything - we're looking forward to a better climate, closer to the coast, more amenities, a nicer house and we just need a change (we've been in the same place for WAY too long). And COL numbers are largely driven by housing costs, and it's not hard to downsize a little to avoid some of the hit.

And you have to look at ALL taxes and fees to really know how a move will affect you. No income taxes usually means higher property taxes, personal property taxes, sales tax, gasoline taxes, impact fees and/or other taxes and fees. My Dad lived in TX with no state income taxes, but property taxes and sales taxes were relatively high...

 

[kgtest]

Not really for tax reasons, but I bought property and planned a move to a state with 2% lower income tax than what I was in. I screwed myself over by waiting to exercise most of my stock options after the change in residence, and during that time the stock tanked and all my options went underwater. Took 10 more years to recover enough to finally retire.

So chasing the 2% tax tail cost you 10 years of FIRE? Uftah! Lesson learned, diversify and don't let the tax tail wag the dog.

 

[golfnut]

My choice is Tennessee due to lower property taxes, no income taxes, and moderate climate compared to Illinois. Once I convince DW of all of the above, a move will follow.

Convincing the wife to move out of Illinois has been impossible for me so far.

 

[RunningBum]

So chasing the 2% tax tail cost you 10 years of FIRE? Uftah! Lesson learned, diversify and don't let the tax tail wag the dog.

Yep, for sure.

Of course it's all a little more complicated than that. I was poorly diversified for years and let those stock options ride, and it doubled every year for a few years so that worked well, and I did take some off the table. But there did come a point where I knew I had enough, sold some and definitely considered cashing totally out and leaving, but I didn't. Part of it was not quite being mentally ready to leave, part of it was OMY greed, and part of it was, why not wait for a free 2% bump just by waiting to make the planned move? I remember talking to others at work in the same position, and we agreed it was a bad idea to have most of our eggs in one basket, but it was a golden basket! Until it wasn't.

In the aftermath of the bubble burst I got a lot more diversified and am now what I consider totally diversified (most in VG Total Stock, Total International, Core bond, and CDs). Taxes are a consideration but not an overriding factor in my decisions.

It is by far the financial decision I most regret, though when I look back it's possible it could've worked out worse. I could've cashed out and quit, but might have continued investing in dotcom stocks, and lost a bundle when that sector crashed. Then I would't have had enough money, and without a job and in a tougher market to find one. The way it worked out, I was able to rebuild and still retire before 50.

I try not to dwell on what could have been had I cashed out and properly diversified immediately, but rather move on and learn from those big mistakes.

Anyway, that's getting off topic, and most people who are moving to a lower/no tax state are just looking to reduce tax on retirement income, but it is a cautionary tale how the tax focus can lead to greed and poor decisions. I would put leaving friends, family and a positive environment for tax reasons as another decision that might have a poor outcome.

 

[kgtest]

Yep, for sure.

Of course it's all a little more complicated than that. I was poorly diversified for years and let those stock options ride, and it doubled every year for a few years so that worked well, and I did take some off the table. But there did come a point where I knew I had enough, sold some and definitely considered cashing totally out and leaving, but I didn't. Part of it was not quite being mentally ready to leave, part of it was OMY greed, and part of it was, why not wait for a free 2% bump just by waiting to make the planned move? I remember talking to others at work in the same position, and we agreed it was a bad idea to have most of our eggs in one basket, but it was a golden basket! Until it wasn't.

In the aftermath of the bubble burst I got a lot more diversified and am now what I consider totally diversified (most in VG Total Stock, Total International, Core bond, and CDs). Taxes are a consideration but not an overriding factor in my decisions.

It is by far the financial decision I most regret, though when I look back it's possible it could've worked out worse. I could've cashed out and quit, but might have continued investing in dotcom stocks, and lost a bundle when that sector crashed. Then I would't have had enough money, and without a job and in a tougher market to find one. The way it worked out, I was able to rebuild and still retire before 50.

I try not to dwell on what could have been had I cashed out and properly diversified immediately, but rather move on and learn from those big mistakes.

Anyway, that's getting off topic, and most people who are moving to a lower/no tax state are just looking to reduce tax on retirement income, but it is a cautionary tale how the tax focus can lead to greed and poor decisions. I would put leaving friends, family and a positive environment for tax reasons as another decision that might have a poor outcome.

Thanks for sharing. I agree leaving friends and family causes a bit if grief. I have a buddy in the valley with a ton of PayPal shares. I keep telling him to diversify a bit but he is ridin that gravy train or golden egg lol. My dad and this forum have led me to the risk tolerance level of no more than 10% of one equity. So far investing has been one of the few exceptions in my life where I learn the hard way...beyond just undercontributing with a serious imposter syndrome ive overcome. Ive been at a conpany on the outside of thst group of guys you mentioned discussing the risk of being heavy on co stock. Only I was a newbie the stock tanked they were more happy they were able to keep therr job and I just jumped off the sinking ship. Ive never been too invested in these companies I work for ever since...but I do invest in myself.

 

[Spock]

I may be the only one here that will choose the State of South Dakota. No state income tax, excellent medical facilities and airport in Sioux Falls. World class hunting & fishing. Low cost of living and low crime. If winter gets long, fly someplace warm for a while.

You're not the only one.
But then DW and I both grew up in the neighborhood. The six weeks of Sept-early Oct are nice. The rest well....

 

[Teacher Terry]

I moved to Nevada 22 years ago for a job. My husband is a native. We have very low property taxes and no state income tax. I love the mild 4 seasons and all the festivals, etc so always lots to do. Plus we have a great friend network. I wouldn’t move for tax reasons. Someone on another forum did and a year later still unhappy.

 

[Clone]

We bought a winter place in Arizona. One of the thoughts was 'would it be worth it to change residence? Did the math, and it was close to a wash. Looked at South Dakota- perhaps $2500 per year savings. We like where we are now, and it is in the middle of the tax bite/benefit mix. We would not consider relocating to Minnesota, where I grew up, have relatives, and have farm land. Partly because of taxes, but also because of weather.



Our next move will likely be to downsize into a condo that is part of a continuous care retirement facility. We have experience with this place, and it is near our children. But that is probably 5 to 10 years out. We do not plan to become full-time baby sitters, if/when that day comes.

 

[Rushmore]

I may be the only one here that will choose the State of South Dakota. No state income tax, excellent medical facilities and airport in Sioux Falls. World class hunting & fishing. Low cost of living and low crime. If winter gets long, fly someplace warm for a while.

not the only one here. I too live in SD, but on the other side of the state. I like it here, but then winter doesn’t really bother me

 

[CaliKid]

Never let the tax tail wag the dog. You got one life (as far as I know) so live where you want to live. Live where you think offers the best overall quality of life considering all factors. To control where you live based on a few bucks of tax is nonsensical to me.

 

[Sunset]

If or when we move from IL to FL (one choice) , we will save about $10,500 per year at a minimum. So it's not small potatoes, and could be quite a bit more as nearly bankrupt IL searches for new $$$$ to feed their enormous debt.

On the other hand, I've even thought of moving to HI , just because it's so nice there it could be worth the extra expense.

Too many choices.

 

[Sunset]

I moved to Nevada 22 years ago for a job. My husband is a native. We have very low property taxes and no state income tax. I love the mild 4 seasons and all the festivals, etc so always lots to do. Plus we have a great friend network. I wouldn’t move for tax reasons. Someone on another forum did and a year later still unhappy.

Did this person move to NV or some other state ?
Why do you think they are unhappy ?

 

[ShokWaveRider]

A High Quality of Life which includes good access to quality healthcare locally, comes before anything else. As one gets older one has less time. Wasting that time to save a few bucks as CaliKid says is simply nonsensical and false economy. Notice I mention a High QOL, not just an adequate one. Most can achieve an adequate QOL, a few will have a high QOL. All other reasons are simply noise.